Within the last year, the insurance industry has been hit by an increase in questionable vehicle glass claims, up 511% for the third quarter of 2010 compared to the same period in 2009, according to the National Insurance Crime Bureau. Questionable claims may range from fraud to complaints from policyholders of pushy salesmen offering free chip repair to reports that they were pressured into unnecessary glass repair.
When reviewing work completed by glass companies that use high-pressure sales tactics at gas stations, car washes, etc., a Safelite Solutions study determined that repair or replacement was needed in only about half of the claims filed. In addition, many claims are being inflated. Replacement costs are being sought when only repairs are done, and more chip repair claims are being filed than were actually performed. By reducing these fraudulent claims, the insurance industry could save up to $15 million in 2011.
Tailored to Each Carrier
To prevent insurance fraud and high-pressure experiences, many insurance companies are implementing inspection protocols to verify damage prior to scheduling a repair or replacement. Most recently, USAA announced its five-state pre-inspection program, which it undertook as a result of feedback from members indicating some felt coerced or pressured to make glass claims when in reality there may not have been any damage to their glass. GEICO made a similar announcement in January 2010.
A pre-inspection program should be customized to fit the needs of the individual insurer and will best be based on trends specific to its region and clientele demographics. Programs vary on how inspections are managed depending on policy requirements and the carrier's goals. Some programs require all vendors to undergo an inspection to validate the need for repair or replacement. Others may see patterns of particular vendors upon reviewing their records over time and require only those glass shops with repeated complaints to undergo the pre-inspection.
Validations can be completed over the phone with an agent asking the policyholder questions about the damage, but carriers often mandate physical inspections. One of the core principles is to allow policyholders to escape high-pressure, "you have to get it done right now" sales tactics so they can make more informed and considered decisions regarding a possible claim.
Another factor in determining if a pre-inspection program will benefit the insurer is the added expense and time required by its inspectors. There is often a substantial return on investment for insurers that are being hit hard by auto glass fraud. Others may find it more cost-efficient to outsource the service.
No matter the method the insurer selects for its needs, it is crucial that policyholders be able to get their cars repaired quickly while still ensuring the damage is legitimate. Most inspections happen within the first 24 hours of a claim being reported.
Generally, initial feedback from policyholders who have experienced this new protocol has been positive. There are several reasons for this. If policyholders have legitimate glass damage, they typically contact their insurance company first and then schedule an appointment. This might take several days—the standard turnaround time. If the policyholder does not notice the damage but, rather, it's pointed out by someone at the car wash or gas station unexpectedly, the damage is probably not so extensive that it must be fixed on the spot, and, therefore, the policyholder is comfortable with a time frame that includes the inspection. Additionally, pre-inspections are common with all types of vehicle claims except glass damage. It is a general process policyholders have come to expect.
The increase of pre-inspection programs has been widely debated within the auto glass repair and replacement industry. The fact is that glass shops that perform quality work on legitimate damage will not have their repair numbers decreased by the process.
Policyholders benefit by being protected from filing unnecessary claims and being exposed to sub-standard repairs or replacements. Insurance companies benefit from improved policyholder experiences and a reduction in fraudulent or unnecessary claims.
To date, pre-inspection programs have been implemented by several insurers in the following states: Arizona, California, Florida, New Jersey, New York, North Carolina, Texas and Virginia. Preliminary data from these pilot programs show a significant drop in questionable claims and customer complaints. For example, one insurance company reported a 75% decline in referrals from specific glass shops since beginning pre-inspections in late October 2010. Perhaps the most dramatic drop was in Virginia, where one carrier began pre-inspections on questionable claims in April. As of the end of the year, these claims were down 95%.
Depending on the work to be performed (repair or replacement) and the region of the country, when insurance companies implement a pre-inspection program, the claims reported by some specific glass shops are reduced by 50% to 70% on average.
Perhaps the greatest benefit to the insurance company is in increased policyholder satisfaction. Research shows that satisfactory small claims can increase a customer's loyalty to an insurance company. Unfortunately, many of these shady repair companies that operate out of local gas stations, at car washes or door-to-door perform their services poorly. Customer satisfaction surveys show that approval scores drop dramatically when service is provided by one of these low-quality providers.
The Coalition Against Insurance Fraud estimates that insurance fraud costs the U.S. $80 billion or more per year, resulting in higher premiums all across the board. Pre-inspection programs are one more solution to reducing this costly problem.